20 July 2019
Xiaomi, which unveiled its latest full-screen flagship phone -- the Mi Mix 3 -- last week, needs to reassure investors that it can grow shipments at a faster pace than rival Chinese phone makers. Photo: Reuters
Xiaomi, which unveiled its latest full-screen flagship phone -- the Mi Mix 3 -- last week, needs to reassure investors that it can grow shipments at a faster pace than rival Chinese phone makers. Photo: Reuters

What Xiaomi can do to lift its sagging stock price

Chinese smartphone maker Xiaomi Corp has seen its shares fall more than 30 percent in Hong Kong since an initial public offering in early July. The stock remains weak even now despite news that the firm has achieved its annual phone shipment target of 100 million units in October.

It seems investors are mainly concerned about a sluggish smartphone market in China in the near future, looking beyond Xiaomi’s individual performance in the past few months.

To turn the tide and help lift the valuation, Xiaomi needs to demonstrate that it can gain market share at a faster pace than its smartphone rivals. For now, a lot will depend on how the company’s latest gadget — the Mi Mix 3 device — will be received by consumers and whether the product can generate enough sales to convince investors that Xiaomi is still a fast-growing firm.

Founder and CEO Lei Jun was quite busy in the past few weeks as Xiaomi was preparing for the launch of Mix 3, the group’s new flagship that will compete with other high-end products like iPhone XS series, iPhone XR, Samsung Galaxy Note 9 and Huawei Mate 20 series.

The phone, which features a 93.4 percent screen-to-body ratio with a sliding front camera design, is said to offer the best camera experience, getting ranked the third among the world’s top tier smartphones — after Huawei P20 Pro and iPhone XS Max — on that aspect. Mix 3 will start from 3,299 yuan to 3,999 yuan, making it the firm’s most expensive model.

Just before the unveiling of the Mi 3 last week, Xiaomi announced that has shipped 100 million units of phones as of October 26, completing its annual target more than two months ahead of its original plan. The 100 million shipment benchmark, which was set in less than 10 months this year, is higher than Xioami’s full-year 2017 shipments, which stood at 90 million units. However, the growth hasn’t been fast enough to help Xiaomi win back market share from rivals in China.

According to market research firm Sino-MR, among the top five mobile phone makers in China, vivo shipped 20.62 million units in the third quarter ended September, up 15 percent from a year ago and giving it a market share of 19.2 percent.

OPPO shipments were 20.58 million units, down 4 percent year-on-year and giving it a market share of 19.1 percent. Huawei, meanwhile, shipped 17.11 million units, up 32 percent year-on-year, with a market share of 15.9 percent. Huawei’s Honor sub-brand shipped 13.62 million units, up 19 percent year-on-year, with a market share of 12.7 percent. Xiaomi shipments totaled 12.61 million units, up 1 percent year-on-year with a market share of 11.7 percent.

Going by the figures, it is apparent that Xiaomi’s shipments growth lagged that of major Chinese rivals.

Yes, Xiaomi can be proud of its achievement of selling more than 100 million smartphones within 2018 and can treat it as a key milestone. Still, the company should face up to its core problem, that is the lack of competitiveness against other local rivals, especially Huawei and vivo groups.

Huawei and vivo groups offer a total of four brands in the market, helping the groups grab two-thirds combined share in the Chinese smartphone market in the third quarter.

Xiaomi could only stay at the fifth place in the market even though it is very proud of its product lineup. The flat growth in smartphone shipments sends a warning to Xiaomi management that the firm’s products may not be attractive enough to convince users to upgrade their existing phones.

While Xiaomi is facing the heat in its home market, the company is seeking aggressive expansion overseas, especially in developed markets after a strategic partnership with CK Hutchison.

Xiaomi recently confirmed that it will officially enter the UK market on November 8, following previous initiatives related to Spain, France and Italy. 

The company is expected to bring a flagship mobile phone into the UK market first, but it is not clear whether it would be the just announced Mix 3, or the recently launched Xiaomi 8 Pro. Several Mi brand connected home appliances could be available in the UK market as well.

In the second quarter this year, Xiaomi’s international revenue grew 151.7 percent year-on-year to 16.4 billion yuan, accounting for 36.3 percent of the firm’s total revenue for the period.

Xiaomi emerged as the top smartphone brand in India in terms of unit shipments, but competition is growing more intense in the fast-growing market and the company can hardly afford to take it easy.

While consolidating its position in India, Xiaomi needs to make significant breakthroughs in other developing markets as wll as developed nations such as Britain.   

For investors looking for a turnaround in Xiaomi in terms of share price performance, the next few months and quarters will be an arduous waiting game.

Will the company manage to recover the lost ground, and if so, how quickly? This is the question.   

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EJ Insight writer

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